The NASDAQ 100 index tracks the performances of 100 blue-chip widely traded US non-financial companies listed on the Nasdaq stock exchange. NASDAQ is an acronym for the National Association of Securities Dealers Automated Quotations. The exchange-traded fund PowerShares QQQ Trust (QQQ) is responsible for tracking the Nasdaq 100 index. In this piece, you get to learn more about what the Nasdaq is, how it works, and how it compares to the Nasdaq 100 e-mini to enable you to trade the index like a pro.
The Nasdaq 100, otherwise known as the US Tech 100, remains one of the world’s valuable stock indexes. It comprises the major global tech companies and gives insight into the health of the US economy, and to a considerable extent, that of the world.
The US tech 100 index includes large companies from different industries save for the financial industry, including commercial and investment banks. It is a market capitalization-weighted index made up of about 3,300 common equities listed on the Nasdaq stock exchange. These include common stocks, real estate investment, trust, American depository receipts, and limited partnerships. Being a Nasdaq 100 component calls for specific criteria on the part of the companies.
Nasdaq 100 companies must have the following:
The security must be either American depositary receipts, ordinary shares, common stock, the share of beneficial interest, Real estate investment trusts, limited partnership interests, and tracking stocks.
Should the security fail to meet the criteria as mentioned above, it becomes ineligible for the Nasdaq composite and removed. Nasdaq 100 is a tech-heavy index and comprises of the following composite index.
Technology at 46.4%
Consumer services at 20.15%
Health care at 10.86%
Financials at 8.59%
Industrials at 6.32%
Consumer goods at 5.49%
Oil and gas at 0.71%
Telecommunications at 0.70%
Basic materials at 0.47%
Utilities at 0.30%
Nasdaq 100 comprises of 103 symbols due to several companies with two share classes. Google’s parent company Alphabet and, for example, has GOOGL (Class A) and GOOG (Class C) shares in the index.
The most highly-capitalized companies featured on the Nasdaq 100 index are Apple, Microsoft, Amazon, Facebook, Alphabet, Intel, Comcast, Cisco, PepsiCo, and Adobe. Apple, Microsoft, and Amazon comprise almost 30% of the entire Nasdaq 100. The Nasdaq 100 companies are reviewed quarterly, and inclusion and removal are based on the market capitalization.
The US100 mini index is an electronically traded futures contract that is a fraction of the value of Nasdaq 100. This futures contract is $20 x the Nasdaq–100 index with no less than a tick of 0.25 index points. Since the launch of Micro E-mini in may 2019, over 360 million micro e-mini futures have been traded at CME group. In March 2020, it registered about 2.3 million contracts traded per day. Over 160 thousand individual accounts have traded since its launch, and CME had over 130 thousand new customers submit a trade-in February 2020. Over 50% of those customers traded the Micro E-mini futures.
US-TECH100 Futures CFD, based on the NASDAQ-100 index futures, index futures consists of 100 leading NASDAQ-listed shares. Trade US tech 100 index CFD the index of technology stocks daily, externally the need to buy certain stocks yourself.
The Nasdaq 100 is weighted based on a modified capitalization methodology; if one company becomes so huge that it dominates the index, they can skew the weighting. However, no company on the Nasdaq 100 can have a weighting of over 24%.
The formula used in calculating the index value is:
Aggregate adjusted market value/divisor.
The divisor is calculated as (market value after adjustments/market value before adjustment) multiplied by divisor before adjustments.
The Nasdaq 100 has a regular trading hour when the exchange is open, but it has a pre-market and aftermarket times when the exchange is closed, and orders are filled up. The Nasdaq 100 stays opened within the following hours:
Pre-Opening Session starts at 3:30 AM – 4:00 AM.
The Opening Session starts at 4:00 AM – 9:30 AM.
The closing Auction Freeze Period starts at 3:59 PM – 4:00 PM.
Extended Hours start at 4:00 PM – 8:00 PM.
Usable trading tools for Nasdaq 100 trading depends on the strategy and the trading objectives of the trader. These tools include the support and resistance, moving average, previous day hi-low indicator, pivots, overbought/oversold oscillators, and the Bollinger band.
One way of diversifying your portfolio is to invest in index funds that track the performance of the NASDAQ Composite Index. The index is one of the most followed indexes in the world due to its excellent performance. However, the history of the Nasdaq 100 does not guarantee profitable trading in the future. The most natural way to invest in the Nasdaq Composite Index is by buying an index fund. This fund includes a mutual fund or ETF that tracks the index passively.
There are a handful of factors that affect the price of the Nasdaq 100 index. These factors include the performance of the component stocks of the index and other significant external determinants.
Economic indicators such as employment rates, inflation, and housing are data, typically of macroeconomic scale that predicts an economy’s overall health. These are some of the factors that influence the price of the Nasdaq 100 index.
When a Nasdaq 100 company does well in the market, it interns affect the index price. The weighting system indicates that events affecting the most extensive constituents are more likely to impact the more comprehensive index price.
The e-mini Nasdaq 100 allows market participants to take positions on the Nasdaq 100 index’s performance electronically in an active and liquid market place. The Nasdaq 100 options has numerous expirations ranging from weekly to quarterly and provides even more opportunities for traders, allowing flexibility in managing existing option positions, targeted trading based on market movement, and the ability to trade high impact events.